European Stocks Battle to a Draw

By

William L. Watts And

Michele Maatouk

Updated Jan. 15, 2013 1:18 p.m. ET

European stocks fought to a standstill Tuesday amid worries over the U.S. debt ceiling and European growth.

"The looming threat of further political fallout in the U.S. is the key threat over the coming weeks, with both President [Barak] Obama and Fed Chairman [Ben] Bernanke warning of the dire repercussions if Republicans carry out their threats to withhold an increase in the U.S. debt ceiling beyond the end of February," said Rebecca O'Keeffe, head of investment at Interactive Investor in London.

Equity markets spent much of the day flitting between gains and losses. The Stoxx Europe 600 index closed little changed at 285.97, while the U.K.'s FTSE 100 ended up 0.2% at 6117.31 and France's CAC-40 slipped 0.3% to 3697.35.

Germany's DAX fell 0.7% to 7675.91, underperforming its European peers and hitting a low for the year following disappointing results from software company SAP and uninspiring figures on gross domestic product.

Investors were on edge again after Mr. Bernanke failed to assuage fears about the outlook for the U.S. economy in a speech Monday at the University of Michigan. He said the economy was still fragile, suggesting that for now the Fed will stick to its bond-buying program. Also weighing on sentiment was a warning by U.S. Treasury Secretary Timothy Geithner, who said that the U.S. could hit the debt ceiling by mid February or early March.

Tuesday's trading in U.S. stocks took on a bearish tone, as investors digested a plate of economic data. The Dow Jones Industrial Average nudged down 6.11 points to 13501.21 in midday trading. The Standard & Poor's 500-stock index lost 1.5 points, or 0.1%, to 1469.18. The Nasdaq Composite Index gave up 10.24 points, or 0.3%, to 3107.26.

Technology shares led losses among the S&P 500's 10 sectors as Apple fell 3% to below $500 for the second day in a row. A close below that level would be the company's first since last February. Apple shares have tumbled since closing at an all-time high of $702.10 in September.

Consumer shares rose after Commerce Department data showed retail sales rose more than economists forecast last month. U.S. wholesale prices slipped in December on lower food and energy costs, while U.S. business inventories expanded in November.

However, New York-area factory activity started the year contracting at a faster pace than economists expected, according to a Federal Reserve Bank of New York's Empire State Manufacturing Survey.

In Europe, German gross domestic product fell by 0.5% in the fourth quarter of last year. Still, trade balance figures for the euro zone were a little cheerier, showing the region's surplus on its trade in goods with the rest of the world rose to a record high in November, while exports picked up.

Retailers were among the bright spots in Europe.

Burberry Group rallied 4.6% in London after the luxury-goods merchant delivered stronger-than-expected third-quarter revenue growth on robust sales, despite lowering guidance for sales to department stores.

SAP dropped 3.9% following the release of fourth-quarter results, while the Stoxx 600 index for the sector ended down 2.1%. Analysts said investors had been hoping for more after better-than-expected results last month from U.S. tech giant Oracle.

In London, Anglo American, the world's largest platinum producer, fell 3.7% after announcing plans to cut 400,000 ounces of platinum production capacity, or 7% of global supply. Other industry players gained on the news, however, with Lonmin up 4% and Aquarius Platinum up 11%.

In currency markets, the euro slipped against the dollar and by the time of the European markets' close, was fetching $1.3332 from $1.3382 late Monday in New York, while the dollar was at ¥88.49 from ¥89.48.

Among commodities, light, sweet crude for February delivery was down 18 cents at $93.96 a barrel on the New York Mercantile exchange. Comex Gold for February delivery was up $12.80 at $1,682.20, underpinned by Mr. Bernanke's show of support for accommodative monetary policies. The platinum contract for April delivery was up $30.60 at $1,688.80 a troy ounce, pushing higher than gold for the first time in nine months on news of supply constraints.

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